December 3, 2020

Doctrine of Promissory Estoppel and it’s Applicability in India

The Doctrine of Promissory Estoppel is basically an equitable doctrine. The Doctrine of Promissory Estoppel means where one party by his words or conduct made to the other a clear promise which is intended to create legal relations or even affect a legal relationship.

Background

For the purpose of maintaining a balance between the evolving freedom of individuals and state authority, the role of Administrative law becomes crucial as it has to evolve itself to suit the varied demands and expectations of individuals and their right and duties. Administrative law includes a number of principles which have been established by the court with the objective of making control over the exercise of power so that situation of abuse of power or arbitrariness not arises. Furthermore, such principles protect the interest of individuals against any abuse of power or misuse of power by any organ, agency, and instrumentalities of the State.

The Doctrine of Promissory Estoppel

The Doctrine of Promissory Estoppel is basically an equitable doctrine. The Doctrine of Promissory Estoppel means where one party by his words or conduct made to the other a clear promise which is intended to create legal relations or even affect a legal relationship to arise in the future, knowing or intending that it would be acted upon by the other party to whom the promise is made, and it is fact so acted upon by the other party, the promise would be binding on the party making it and he would not be entitled to go back upon it, if it would be inequitable to allow him to do so. It clearly means that administrative action would be marked by certainty, predictability and consistency.

In Gujarat State Financial Corp. v Lotus Hotels (AIR 1983 SC 848) it was held by the Supreme Court that the writ of mandamus can be issued against the government or its instrumentalities for the enforcement of contractual obligation because here, the doctrine of promissory estoppel is applicable to against the government. Here, the lotus hotels entered into the contract with the State Financial Corporation of Gujarat for a loan for the purpose of construction of a hotel. On this agreed promise, the petitioner took certain loans and thus incurred liabilities. Furthermore, the loan was refused on the basis of acting of two pseudonymous letters attacking the character of the proprietors of loan which was already sanctioned.

Doctrine of Promissory Estoppel is based on obligation or equity and is not based on vested right. In equity, the court has to strike a balance between individuals’ right as well the interest of public. In Union of India v Ganesh Rice Mills (1998) 9 SCC 630, it was held by the court that the Finance Minister’s statement on the floor of the House did not meant a promise or any form of representation to the assesse. Thus, in this case, the government is not estopped from recovering the disputed cess contrary to such statement.

Doctrine of Promissory Estoppel is available against the exercise of executive function of the State. In Express Newspapers Pvt. Ltd. Union of India (AIR 1986 SC 872), The Doctrine of Promissory Estoppel was used to prevent the government for quashing the action of the Minister for approval of a lease as it was within the scope of his authority to grant such permission. This ultimately resulted in checking whether there is fraud on the exercise of power or not. Here, the Express Newspapers were given notices of re-entry upon forfeiture of lease of land granted to them on which the lessee has raised buildings for the purpose of printing and publishing the newspapers. Thus, it was held by the Supreme Court that the action had been politically motivated and there is clear violation of mala fide intention.

Following mentioned are some of the cases wherein the Doctrine of Promissory Estoppel is not applicable:

1) The administration is not bound to refrain from withdrawal of tax exemption or tax holiday

2) The administration is no bound to enact a proposed legislation.

3) The administration is not bound to refrain from performance of statutory duty or discretion.

4) The administration in not bound to create or abolish a civil post, making a change in the condition of service of persons employed in connection with the affairs of the State.

Following mentioned are the essential characteristics to make promise binding on the government:

1) The promise made by the State must be within the scope of law.

2) There must be pure intention to enter into a legal relationship.

3) The other party must act accordance of the promise or will be forbidden to do anything.

Conclusion

In this modern era, the promise of Government to citizens or for that matter even the non-citizens is of great importance especially in case where the government enters into a promise for a contractual or a business transaction. It becomes quite important to protect the interests of citizens when such persons with their earnest money invests with the government and later receives dejection or cheating from the government, thereby not abiding by their promise. In such a situation, the individual’s investment becomes in a position of danger thereby leaving the person helpless.

Thus, to deal with such a situation, the Doctrine of Promissory Estoppel came into function. The Indian Judiciary played a vital role in making the State responsible for its promise and further made accountable the State to abide by the promise so made.


Author Details: Yashika Kapoor (Fairfield Institute of Management and Technology)

The views of the author are personal only. (if any)

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